Investors utilise Zim local bank funds as volatility escalates

Zimbabwean investors are finding solace in banks and other financial instruments and this has driven earnings for banks and fund managers. Picture: AP Photo/Tsvangirayi Mukwazhi

HARARE -
Zimbabwean investors are finding solace in banks and other financial
instruments and this has driven earnings for banks and fund managers whom officials say are able to provide cover through advances in local bank funds as volatility and fluctuations hit local financial markets.

A stand-off between the major political parties in Zimbabwe over the outcome of the country’s July 30 elections has exacerbated volatility. The premium on parallel market rates for the US Dollar has spiked to above 75 percent.

Corporate executives say investors are jittery, with funding for most projects on hold for now. However, other investors have turned to banks and fund managers to hold their funds while the banks utilise local funds they are holding, two finance managers told Business Report this week.

“It’s considered risky to bring in hard currency at the moment. Those who are anxious to start working on some projects here have been utilising local funds held by banks and other finance institutions,” said one of the finance managers, declining to give further details.

Finance companies such as Old Mutual, Barclays Zimbabwe and FBC Bank this week reported profit surges. Another bank, ZB Bank withdrew a trading cautionary widely said to have been a suggestion of a take-over bid for the bank.

Old Mutual Zimbabwe CEO, Jonas Mushosho said this week that “funds under management for the asset management business went up by 38 percent” to $2.9 billion during the first half of the current year.

This was largely driven by a growth in “net client cash flows (NCCF) and fair value gains on listed” equities. This is despite volatility on the Zimbabwe Stock Exchange which is wobbling from “investors taking positions ahead of elections and profit taking” on signs of possible overheating.

“In spite of recent volatility, we believe the stock market will continue to offer a sustainable hedge against environmental risks such as inflation. Equities also provide growth prospects as the environment stabilises,” added Mushosho.

Old Mutual’s banking unit, CABS as well as Barclays Zimbabwe have also reported a surge in loans and advances for the half year to June. For CABS, loans and advances grew by 29 percent to $765 million during the period under review, driven by “growth in mortgages, salary based loans to individuals and loans” to corporates.

Analysts at IH Securities said on Thursday that “growing the loan book was a key focus” for Barclays Zimbabwe as the tries to be “more competitive and relevant” to the local market.

Loans and advances for the bank grew by 27.7 percent to $143.12mn and the bank attributed this to “an increase in corporate lending which rose from $52.85mn in FY17 to $81.48mn” in 1H18.

“We believe that this trend will continue into the second half of the year as we saw corporate lending, in particular, growing by 54.2 percent. We expect the bank’s loan book to grow to $151.25mn, a 35% growth y/y while we have forecast total treasury bills to grow by 173.6 percent y/y to $317.93mn in FY18, up from $116.19mn in FY17,” said the analysts in a commentary on the bank’s results.